When Apple announced its $100 billion share buyback program earlier this year, Ralph Nader was quite unhappy, and expressed the same in an open letter to Tim Cook. Nader, a consumer advocate, has now again come forward to express his views on how Apple could spent its “excess billions.”
Alternatives from Ralph Nader
In a recent interview with NPR, Nader stated that rather than spending money in buying back the shares, the Cupertino, California-based company should use the money to hire more employees. “It could have been used to increase [the number of] employees. It could have been used to shore up the pension fund,” Nader says.
Further, Nader stated that the funds should be utilized to better the recycling practices for the older phones, research and development or paying out a dividend to the shareholders. Ralph Nader stated that Apple could have spent just 2% of the $100 billion to enhance the recycling of used computers and phones that are bad for both the environment and the workers.
Though Nader acknowledged that the iPhone maker is involved in activities such as improving working conditions and recycling practices, he claimed that it could still do more. He gave the example of the Chinese workers, who are working under tremendous pressure, and are not even earning a “living wage.”
Nader applauded Apple for its turnaround from “near-extinction” in the mid-1990s to being the world’s most valuable company. Terming the comeback as remarkable, he noted that under Steve Jobs, stock buybacks were prohibited. However, ever since Cook took over, everything has changed. He commented that Marxists could have never imagined the day when companies would have all the capital in the world, but not “know how to use it productively.”
In a candid confession, Nader admitted that he did not use an iPhone or Mac but rather relied on an Underwood typewriter for all his technology related needs. Ralph Nader concluded that the Tim Cook-led company has aced the art of making money with overpriced iPhones, but lacks the understanding of the productive use of those funds.
Apple, meanwhile, continues its buyback program at a record rate. The iPhone maker bought back $43.5 billion of stock during the first six months of 2018, an increase of $14 billion during the same period last year. Also, Apple’s repurchase in the past two quarters, makes it the biggest in history, notes NY Times. On the Standard & Poor’s 500 stock index, each of the five largest quarterly stock buybacks was from Apple.
Since 2012, Apple repurchased almost $220 billion of its own stocks, roughly as much as the market value of Verizon communications. Over this period, the total number of outstanding shares dropped by just over a quarter.
Tax cuts boost buybacks
Apple share buyback follows the $1.5 trillion tax cut signed into law late last year. The amendments made the corporate tax rate at 21% from 35%, and provided a permanent break on the overseas profits. The objective of the tax cuts is to push companies to make long-term investments in aspects such as new workers and factories to boost the American economy.
However, after these new rules, organizations increased their stock repurchases. In the first-quarter of 2018, companies in the S&P 500 purchased a whopping $178 billion of their own shares. Apple turned out to be the biggest beneficiary of the new tax law in the U.S.
This year in January, the iPhone maker announced that it aims to bring back most of the $252 billion in cash it has hoarded in other countries. In May, Apple stated that a major portion of the cash would be used to buy back an additional $100 billion in stock.
On the jobs front, Apple says that it is looking forward to creating over 20,000 new jobs through hiring at existing campuses and opening a new one. However, it does not indicate how a change in the tax structure might have influenced the decision. Over the past five years, before Apple’s most recent annual report, the full-time equivalent employees at the organization grew from 80,300 to 123,000 across the globe.
In January, the company said that it employed 84,000 people in the U.S., or 68% of the global total for Apple. Taking into account the change in the global to domestic landscape, the Cupertino, California-based company added over 29,000 U.S. jobs in five years before the tax cut.